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Monopolies Take a Fifth of Your Wages
According to a government report released today, monopolies cost workers between 15-25% of their wages. Get ready for action by antitrust enforcers.
Welcome to BIG, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on…
Today’s newsletter is about an important new Treasury report on the relationship between market power and wages. Plus, Clarence Thomas takes another skeptical look at surveillance advertising.
And now…
In 2018, a new Federal Trade Commissioner named Rohit Chopra began stirring up trouble at the agency. There are five commissioners at the FTC, and they traditionally had agreed on how to enforce the laws in favor of fair competition. Dissents were rare, and upsetting, because most staffers and commissioners saw themselves as scientists or experts serving the public under a bipartisan consensus.
Chopra, however, dissented. A lot. He did so because in his view, the FTC had failed in its mandate is to police fair dealing in the American marketplace, including laws against monopolies. Instead of real work, it offered slaps-on-the-wrist to powerful entities, and it failed to stand up for workers, business people, and communities whose rights were being abused. In his first week, Chopra sent an internal memo with the memorable phrase, “FTC orders are not suggestions,” both offending a lot of the old-timers, and making it clear that the parking ticket style penalties the government had been dishing out to lawbreakers would no longer suffice. His dissents had a meaningful impact, and embarrassed commissioners into taking more aggressive action. For instance, despite Chopra being a Democrat, he very likely forced the FTC under Trump to bring an antitrust suit against Facebook.
Chopra’s most important dissent was in a 2018 case called Your Therapy Source, a case in which the FTC caught several employers colluding together to suppress wages, and doing so overtly on text messages. This is straight-up price-fixing and the evidence was ironclad. I did a Twitter thread at the time on the scheme, and why it mattered.

In this case, it’s not that the FTC didn’t act, it’s just that the commission didn’t impose any penalties on the organizer of the scheme. In his dissent, Chopra argued that the FTC should not have let the perpetrator off with a warning, and he made a public criminal referral to the Department of Justice Antitrust Division, which, unlike the FTC, can actually use handcuffs. The DOJ indicted in late 2020, and the courts upheld the indictment late last year in United States vs. Jindal.
That case is the first antitrust criminal case against wage-fixing that made it past the motion-to-dismiss stage, meaning that the Antitrust Division has brought wage-fixing as a crime under the orbit of the antitrust laws for the first time in history. Until Jindal, it hadn’t been accepted by the antitrust bar and the libertarian establishment that monopolizing the purchase of labor is an acceptable purpose of the antitrust laws. Despite increasing rhetoric around labor and mergers, for instance, the Trump administration chose to allow the merger to monopoly of two gold mines in Nevada. As workers no longer could threaten to leave one mine and work for the other, this merger led immediately to lower wages and the decertification of the union representing workers at the mines. Clearly, market power matters not just consumers, but over workers as well. (And this has been obvious for a long time; I first wrote about this dynamic in 2017 in Vice, in a piece on how monopoly power costs workers $14k a year.)
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You would think this dynamic would be recognized by everyone at this point, but in fact, it’s still not entirely accepted by Chicago School stalwarts. The New York Times quoted antitrust defense lawyers whining about the new framework.
A note by the law firm White & Case, for instance, complained that the move to block Penguin Random House’s attempt to buy Simon & Schuster on the grounds that it would reduce royalties to authors is “emblematic of the Biden administration’s and the new populist antitrust movement’s push to direct the purpose of antitrust away from consumer welfare price effects and towards other social harms.”
And just two weeks ago, Christine Wilson and Noah Phillips, who are the pro-monopoly commissioners at the Federal Trade Commission, held fast to their consumer welfare ideology which excludes the effects of market power on labor. They refused to allow the FTC to look at whether a merger of two Rhode Island hospitals will reduce competition for the services of nurses and doctors.
Wilson and Phillips, though, are pretty much dead-enders, holding on to an ideology that makes increasingly little sense in either party or within the antitrust world. The courts are moving away from a pure consumer welfare analysis. Now, the Antitrust Division is going after wage-fixing in several more cases, and corporate lawyers are telling every firm in America to stop the practice of holding down wages with illegal schemes.
So as it turns out, Chopra was on to a lot more than just one scheme. Chopra is no longer at the FTC, but the work he did, and that Antitrust Division lawyers picked up on, is reverberating. Earlier this week, the Biden administration’s Treasury Department put out an astonishing report on the relationship between monopoly power and labor. To sum up, monopoly power costs workers a lot of money. “The bulk of our selected studies,” reads the report, “estimate average wage losses to be on the order of 15–25 cents on the dollar (alternately, workers earn between 75 and 85 cents for each dollar of value produced).”
What Treasury did was to summarize the last ten years of economic research, similar to Eric Posner’s book How Antitrust Failed Workers. (I reviewed Posner’s book for the American Compass last year, and Posner has since joined the Department of Justice Antitrust Division.)
The premise of the report is that employers are quite powerful in determining wages, both through concentration and through contractual agreements like non-compete clauses (which I wrote about two years ago). The Treasury Department quotes Nobel prize winner David Card, who told a gathering of the American Economics Association, “I will try to make the case that the time has come to recognize that many—or even most—firms have some wage-setting power.” The second-order effects of this employer wage-setting power isn’t just lower wages, but lower productivity, as well as less entrepreneurship as workers are prohibited from starting businesses.
The data in the report is quite useful, even if the writing is that of a book report recitation of what some economists have written over the last few years. Here are five different facts from the report on employer restrictions of wages.
56.2% of non-union employees, or about 60 million workers, are subject to mandatory arbitration agreements.
Nearly two-thirds of workers at firms with at least 1,000 employees are subject to mandatory arbitration clauses.
Academic studies place the decrease in wages due to monopoly power at roughly 20% relative to the level in a fully competitive market. In some industries and occupations, like manufacturing, estimates of wage losses are even higher.
A recent paper estimates that one-in-five workers is currently subject to non-compete agreements and double that number report having been bound by a non-compete agreement in the past.
The labor market has become “fissured,” a wide variety of roles ranging from cafeteria workers and janitors to lawyers that were once “in-house” are now contracted out. This domestic outsourcing is estimated to reduce wages from 4 percent to 24 percent in some industries and occupations.
The report offers a number of common restrictions forced on workers, from non-competes to non-disclosure agreements.
In terms of policy, there are standard pro-union proposals and suggestions to raise the minimum wage, as well as administrative action to do so. More interestingly, the report also suggests rule-making by the FTC to prohibit non-compete agreements. That will almost certainly happen, in one form or another. And when it does, the FTC is going to need backup to persuade judges that it’s there’s an emerging consensus in the economics profession that market power lowers wages and reduces market efficiency. This report is that backup.
So get ready. Because tens of millions of people are about to have the non-compete clauses in their contracts declared void. And if employers are wage-fixing, the Antitrust Division is coming with handcuffs.
Clarence Thomas Takes a Skeptical Eye Towards Surveillance Advertising
Starting in late 2020, conservative Supreme Court Justice Clarence Thomas has gone on a rampage against Silicon Valley, arguing they should be treated as common carriers and that Google, at the very least, is a powerful monopoly. Today, Thomas issued yet another statement, this one directed towards Facebook and the legal underpinning for the internet, Section 230 of the Communications Decency Act. He made this statement in a case about whether Facebook is immune from a charge of the firm facilitating human trafficking of a 15-year old girl, after a man used the service to lure her to a meeting and abuse and abduct her.
Section 230, passed in 1996, is the legal underpinning for the internet, as it shields anyone with a website or app from being responsible for the content that users put out there. Users can libel one another, trade illegal goods, or harass each other, and courts have ruled that the underlying platform isn’t responsible. Grindr, for instance, knowingly facilitated the violent stalking of a man by his boyfriend, but was held immune from liability. Amazon has argued it’s not responsible for counterfeit products sold on its website, and credit reporting agencies are trying to use the law to avoid being regulated for mistakes in one’s credit report. Abuse of this law is common.
Section 230 has become the shield for swaths of corrupt activities; Facebook can’t be held liable for enabling with Grindr did, for the same reason, because it is merely an ‘interactive computer service.’ Like J.C.’s impersonation of Herrick, scammers use Facebook to impersonate soldiers so as to start fake long-distance relationships with lonely people, eventually tricking their victims into sending their ‘boyfriends’ money. Soldiers are constantly finding fake profiles of themselves, and victims are constantly cheated in heart-breaking ways. The military is helpless to do much about this, the power to act is in Facebook’s hands.
The reason for the use and misuse of Section 230 is simple. Advertising money. In particular, the kind of advertising facilitated by large swaths of personal data depends on Section 230 immunity, otherwise dominant platforms would have to spend large amounts on content moderation, and probably couldn’t avoid liability even if it did so. Thomas doesn’t like this setup, and in his statement, he pointed out that Facebook refused to do anything to stop the use of its services by human traffickers “because doing so would cost the company users—and the advertising revenue those users generate.”
And thus, he argues, “It is hard to see why the protection §230(c)(1) grants publishers against being held strictly liable for third parties’ content should protect Facebook from liability for its own “acts and omissions.”” Thomas’s comment was in a procedural motion, not a case, so it doesn’t create any precedent. But he continues to ask lawyers to bring the Supreme Court a case where it can narrow the scope of Section 230. And eventually, someone will.
What I’m Reading
Chairs Clyburn and Krishnamoorthi Seek Information from Ocean Freight Carriers About Price Increases for Americans. Congressman Krishnamoorthi is the best investigator in Congress, and his work tends to uncover meaningful problems and leads to policy changes. And he just turned his eyes to the ocean carrier industry.
Banks Sit on Billions of LBO Financings as Demand for Debt Falls, Bloomberg Is the private equity wave cresting?
A drug for pregnant women doesn’t work, according to the FDA. A company is selling it anyway, LA Times
The End of Globalism, The American Prospect
Moderna Signals It May Enforce Covid-19 Vaccine Patents in Wealthy Nations, Wall Street Journal
Alarm raised after Microsoft wins data-encoding patent, The Register
Google's big audio investments hint at ambitious plans for headphones, Protocol
Handcuffed by the Courts, Institute for Local Self-Reliance
Democrats Target Oil Companies With Plan to Tax Windfall Profits, Bloomberg
Thanks for reading!
And please send me tips on weird monopolies, stories I’ve missed, or comments by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation and democracy. And consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member.
cheers,
Matt Stoller
P.S. I did a video for Breaking Points on what the war in Ukraine reveals about the American economy, which you can watch here.
Monopolies Take a Fifth of Your Wages
I can't think of many bigger wins impacting millions of workers than getting rid of non-competes and cracking down on "contractor" games that employers play.
"Because tens of millions of people are about to have the non-compete clauses in their contracts declared void. And if employers are wage-fixing, the Antitrust Division is coming with handcuffs."
That's great, it will stimulate the economy. Each worker is like a small businesses and as everybody knows its small businesses that drive the economy, not clunky, inefficient and corrupt monopolies that suck. Furthermore, each worker is also a consumer and we know that consumers must be protected at all costs. EACH WORKER IS LIKE A SMALL BUSINESS. STOP CRUSHING SMALL BUSINESSES.